Ives v Price
[1989] TASSC 34
•23 August 1989
Serial No 30/1989
List "A"
CITATION: Ives v Price [1989] TASSC 34; A30/1989
PARTIES: IVES
v
PRICE
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 130/1987
FCA 131/1987
DELIVERED ON: 23 August 1989
JUDGMENT OF: Green CJ, Cox and Wright JJ
Judgment Number: A30/1989
Number of paragraphs: 50
Serial No 30/1989
List "A"
File No FCA 130/1987FCA 131/1987
IVES & ANOR v PRICE & ANOR
REASONS FOR JUDGMENT FULL COURT
GREEN CJ
COX J
WRIGHT J
23 August 1989
Orders of the Court
FCA 130/1987
Appeal allowed
Verdict and judgment set aside.
That there be a new trial of the action.
FCA 131/1987
Appeal allowed
Verdict and judgment set aside.
That there be a new trial of the action.
Serial No 30/1989
List "A"
File No FCA 130/1987FCA 131/1987
IVES & ANOR v PRICE & ANOR
REASONS FOR JUDGMENT FULL COURT
GREEN CJ
23 August 1989
By an agreement in writing dated 16 May 1985 the respondents agreed to work and farm a property situated at Huett's Road, Edith Creek owned by the appellants until 1 June 1990. By proceedings commenced on 10 February 1986 (the first action) the respondents claimed damages for various alleged breaches of the agreement by the appellants. The appellants denied the breaches and counterclaimed damages for breaches of the agreement by the respondents.
By letters dated 10 June 1986 and 26 June 1986 the appellants repudiated the agreement. The respondents accepted the repudiation and vacated the property on 27 July 1986.
By proceedings commenced on 30 September 1986 (the second action) the respondents claimed damages for the repudiation and sought recovery of $1,000 paid by them to the appellants pursuant to the agreement as a bond. The appellants alleged that they were entitled to repudiate the agreement and to retain the amount paid under the bond on the ground that the respondents were in breach of the agreement.
By consent the actions were heard at the same time before a jury. In the first action the jury found for the respondents on the claim and assessed damages in the sum of $12,774.38 and found for the appellants on the counterclaim and assessed damages in the sum of $2,792.35. In the second action the jury found for the respondents and assessed damages in the sum of $105,401.30. After setting off the awards in the first action the trial judge ordered that judgments be entered in accordance with the verdicts.
These are appeals and applications for a new trial in respect of both actions on the grounds that the damages awarded in respect of both claims were manifestly excessive, that the damages awarded in respect of the counterclaim were manifestly inadequate and upon a number of other grounds alleging that the learned trial judge erred in a number of respects.
Clause 3(a) of the agreement provided that:–
"The owner" [the appellants] "at his own cost:–
(a)Shall sell to the Farmer" [the respondents] "100 milking cows and 1 Bull presently situated on the property;"
In the first action the respondents pleaded in para3 of the statement of claim that:–
"It was an implied term of the said agreement and in addition the first–named defendant warranted to the first–named plaintiff prior to the execution of the said agreement, whereby such warranty formed part of the said agreement, that the said milking cows were in calf and that such calves would be born over a period of nine weeks commencing on 14th day of August, 1985."
In the second action the appellants pleaded in their defence that they were entitled to repudiate the agreement by virtue of, inter alia, breaches of the agreement by the respondents which the appellants had particularised in the letter of repudiation written by their solicitor dated 10 June 1986. Part of that letter read:–
"My clients are exercising their option to determine this Agreement pursuant to Clause 21(b) of the said Agreement. The grounds on which your clients have breached the Agreement are as follows:–
1Contrary to Clause 38 of the Agreement Price has failed to meet the production of butter fat of 22,000 kilograms in the first year of occupation of the property;"
In their reply in the second action the respondents pleaded, inter alia:–
"As to the alleged breaches particularised in the said correspondence the plaintiffs say as follows:
(a)The plaintiffs admit that they failed to meet the required butterfat production for the first year but say that this was due to the defendants' breach of the said Agreement in that they:
(i)Sold to the plaintiffs 17 empty cows and 28 which had to be prematurely induced;"
An empty cow was understood by the parties to be a cow not in calf and by this allegation the respondents have been taken to be relying upon the same breaches of the implied term or collateral warranty upon which they relied in their statement of claim in the first action.
In both appeals the following grounds, inter alia, are relied upon:–
"2 The learned trial judge erred in law in leaving to the jury
(a) the question of whether the expression 'milking cows' in clause 3(a) of the parties' sharefarming agreement dated the 16th May 1985 meant "cows in calf and due to calve within a nine week period commencing on the 14th August 1985";
(b) the question of whether the said agreement contained an implied term to the effect that the milking cows referred to in the said clause were all in calf and that they were due to calve within a period of nine weeks commencing on the 14th August 1985:
(c) the question of whether the defendants had given the plaintiffs collateral oral warranties that 100 cows sold by the defendants to the plaintiffs
(i)were all in calf, and
(ii)were due to calve within a period of about 9 weeks commencing on or about the 14th August 1985;
.................
when such findings were not open to the jury on the pleadings and the evidence."
It is important to emphasise at the outset that the written agreement referred to in paragraphs 1 of each statement of claim was the only agreement relied upon by the respondents to found their action and that although a brief submission to the contrary was made to the trial judge which was not persisted in, the respondents were not alleging that the agreement between the parties was partly oral and partly in writing. In addition, notwithstanding the way in which para3 of the statement of claim was drafted, the trial was conducted on the basis that the second limb of the allegation which is made in it was an allegation of the existence of a collateral warranty.
It should also be noted that notwithstanding that it appears that sometimes counsel overlooked the fact, the only construction of the phrase "milking cows" relied upon by the respondents and the only implied term or collateral warranty relied upon by the respondents was that the cows "were in calf and that such calves would be born over a period of nine weeks commencing on 14 day of August 1985" and that no allegation was made in the alternative that, for example, the appellants' obligation was simply to supply "cows in calf".
The first respondent Mr Price gave evidence that he had been involved in dairy farming for about 18 years and in share farming for about 12 years. Mr Price had known the first appellant Mr Ives since 1983 and before entering into the agreement the subject of these actions had entered into another share farming agreement with him relating to another property. For personal reasons Mr Price decided in 1985 that he would prefer to work a smaller property. He had discussions with Mr Ives and executed the subject agreement on about 16 May 1985 which is the date it bears.
The respondents rely upon a crucially important conversation which they allege was had with Mr Ives before the execution of the agreement. Mr Price's account of that conversation was given in a piecemeal fashion and in my view was open to more than one interpretation. However, it is not this Court's function to evaluate his evidence but to consider the appellants' grounds of appeal in the light of whatever findings the evidence is lawfully capable of sustaining. Mr Price said that he first spoke to Mr Ives about purchasing the subject cows in May 1985 at Lade's Road and that subsequently on the 7 May 1985 at the Huett's Road property he had another conversation about the cows with Mr Ives and Mr Phillip Hughes. Mr Price said he asked Mr Ives "Are these cows in calf?" to which Mr Ives replied "My word they are". Subsequently in his examination–in–chief Mr Price said that during the same conversation Mr Ives had said that the cows were due to calve "from the 14th of August in a nine week period after that". In cross–examination he enlarged upon that evidence and said that his initial question was directed to both Mr Ives and Mr Hughes and that after Mr Ives had said "My word they are" Mr Hughes mentioned his herd breeding records and said that the cows were going to calve from the 14 August onwards for a period of approximately nine weeks and that after that Mr Ives said something to the same effect. During Mr Price's examination–in–chief the following question was asked and answer was given:–
"When you purchased these one hundred milking cows from Mr Ives, what was your belief in relation to whether they were in calf or not?.......Well they – you know, Mr Ives assured me that they were in calf and you know, there is herd breeding records to substantiate it."
It is not clear what point in time Mr Price understood was being referred to in that question as the time when he "purchased" the cows. When asked in cross–examination why there was no reference in the written agreement to the cows being in calf Mr Price in separate answers referred to an "implied term", said that "it is a practical thing that is done by dairy farmers. It has got to be there" and asked the rhetorical question "A farmer doesn't go and buy 100 empty cows or seventeen empty cows now do they?" But significantly he did not say words to the effect of "it was not in the agreement because of the assurance Mr Ives had already given to me".
There was evidence that pursuant to an agreement with Mr Ives Mr Phillip Hughes had farmed the Huett's Road property with his own cows until 31 May 1985.
Mr Ives gave evidence that he purchased Mr Hughes' cows on about 1 May with a view to putting another share farmer on the property but that at that time he did not have any particular person in mind and had not commenced any discussions with Mr Price. He said that on a date which he initially thought was 14 or 15 May, but later conceded was probably earlier, he introduced Mr Price to Mr Hughes with a view to the possibility of Mr Price taking over the farm. Mr Ives gave evidence to the effect that in response to a query from Mr Price about calving he said he knew nothing about it and referred him to Mr Hughes. Mr Ives denied that the conversation alleged by the respondents took place and denied saying anything to Mr Price at any stage as to whether any of the cows on the Huett's Road property were in calf.
Mr Hughes said that when Mr Ives first introduced Mr Price to him Mr Price did not look at the cows, being more concerned with inspecting the farm. Mr Hughes said that he remembered a conversation between Mr Price, Mr Ives and himself at the property but that during that conversation "nothing much" was said about the cows. He remembered a subsequent conversation with Mr Price when he said that 96 of the cows were in calf and four were empty, but could not remember whether he also said that they were due to calve on 15 August or when they were due to calve. However he was certain that Mr Ives was not present at that conversation. The respondents do not contend that Mr Hughes was the appellants' agent or that anything he said had contractual significance.
The evidence showed that Mr Price did not see the herd breeding records until after the agreement had been executed.
It can be seen that virtually the only evidence which was capable of supporting a finding that the representation alleged in the statement of claim was made by Mr Ives was that given by Mr Price.
The respondents did not expressly plead that the written agreement per se (ie without the implied term or the collateral warranty) obliged the appellants to deliver cows which would calve within nine weeks of the 14 August but in the course of his address to the jury counsel for the respondents said:–
"Now the agreement in clause (3A) states,
'The owner at his own cost shall sell to the farmer 100 milking cows and one bull presently situated on the property'.
Now you might ask yourself, what is a milking cow? You see the definition of a milking cow is not contained in the agreement, it simply says, milking cows. Now we contend that in the circumstances of this agreement and the circumstances of the conversation that Mr Price had with Mr Ives before he purchased the cows and he saw the bull running in the property was quite clearly milking cow means, a cow in calf. Now you won't find any definition of that effect in the agreement. And you might think to yourself, well Mr and Mrs Price milked these cows when they bought them up until the 4th of July when they dried them off. Therefore that's a milking cow. But if you look to the other terms of the agreement in particular the butter fat quotas that it contained, then that clearly infers that milking cow for a person who bought a herd, a seasonal herd must mean a milking cow which was then in calf otherwise he can't produce his milk. He can't keep up with the quotas. So quite clearly that's what the parties meant by that. And I want to suggest to you, you'll have no difficulty with that."
In that passage counsel seems to be referring to both the meaning of the phrase and the allegation that a term ought to be implied. Subsequently in his address counsel referred to the question of "whether any assurance was given by Mr Ives about whether these cows were in calf" as a distinct issue.
The learned trial judge gave the jury a memorandum of which the following is material for present purposes:–
"2 CONSTRUCTION OF THE CONTRACT
The construction of the written contract is a question of law, and therefore for the court to determine, as soon as the true meaning intended by the parties of the words in which it has been expressed, and the surrounding circumstances, if any, have been ascertained as facts by the jury.
For example, the meaning of the expression 'milking cows', in paragraph 3(a) of the agreement, is a question of fact to be determined by the jury in accordance with these principles; the object being to ascertain what the parties meant by that expression when they used it.
............................
4 IMPLIED TERMS IN A CONTRACT
A court will be prepared to imply a term in a written contract if there arises from the language of the contract itself, and the circumstances under which it is entered into, an inference that the parties must have intended that the term should apply.
(One aspect of that proposition is that, as I understand, Price claims that the expression 'milking cows', in paragraph 3 of the agreement, should in all the circumstances of the case be construed to have been intended by the parties to mean cows which were in calf at the time of the sale, and whose calves would be, in a seasonal milking pattern, as this farm had been conducted by Hughes and was intended to be conducted by Price, born within a period of approximately nine weeks from 14th August 1985. It is a question for the jury whether this is the proper interpretation of that expression.)
...............................
5 COLLATERAL WARRANTY
The courts are prepared in some circumstances to treat a statement intended to have contractual effect as a separate contract or warranty, collateral to the main transaction. In particular, they will do so where one party refuses to enter into the contract unless the other party gives him an assurance on a certain point.
(Thus, in one case, where a prospective tenant refused to complete the lease of a house unless the defendant assured him that the drains were in good order, the court held that the assurance constituted a contract collateral to the lease). In general, it may be said that when a person gives a promise or an assurance to another, intending that he should act on it by entering into a contract, and he does act on it by entering into the contract, it will be held to be binding.
(Mr Price contends that Mr Ives gave him such an assurance, that the cows were all in calf, and that the calves were due to be born in a period of approximately nine weeks from 14th August 1985. Mr Ives denies that he gave Mr Price any such assurances.)"
In the course of his summing up the learned trial judge referred to the issue of the construction of the contract and said:–
"I understood from counsel for the plaintiffs when these questions were discussed in your absence that the plaintiffs contend that milking cows – the expression 'milking cows' is wide enough to cover or is wide enough to mean "cows in calf", and indeed cows in calf who will produce calves within a particular period. Now that may seem a far fetched proposition, I don't know. It is a matter for you. I noticed that counsel for the plaintiffs didn't, I think, mention this at all in address but nevertheless he puts to me that I should say to you that even on the straight out interpretation of the contract that the expression 'milking cows' is wide enough to cover cows in calf and indeed cows who will calve within a particular period because of the nature of this seasonal milking operation. Well, as I say, you may not think there is much in that but that is a question for you."
His Honour then went on to deal with the allegation of an implied term and a collateral warranty as distinct heads of the respondents' claim.
In my view notwithstanding the lack of definition with which those claims were pleaded and with which they were advanced in counsel's address it is clear that in the end the jury were being invited to find that the appellants had a contractual obligation to deliver cows which would calve within the period alleged on one of three distinct and presumably alternative bases, namely that they were obliged to do so by virtue of the terms of the written agreement, by virtue of the implied term, or pursuant to the collateral warranty. It is also clear that the jury must have found that one or more of those bases had been established.
Ground 2(c)
Although it was open to the jury to find that Mr Ives made the statement attributed to him, in my view the respondents' case was seriously deficient in a number of material respects.
Even if it can be inferred that Mr Ives' representation constituted a material inducement to the respondents to enter into the agreement that is not decisive. As the High Court observed in Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435 at 442:–
"The Full Court seems to have thought it sufficient in order to establish a collateral warranty that without the statement as to the estimated speed the contract of purchase would never have been made. But that circumstance is, in our opinion, in itself insufficient to support the conclusion that a warranty was given. So much can be said of an innocent representation inducing a contract. The question is whether there was a promise by the appellant that the boat would in fact attain the stated speed if powered by the stipulated engine, the entry into the contract to purchase the boat providing the consideration to make the promise effective. The expression in De Lassalle v Guildford [1901] 2 KB 215, at p222 that without the statement the contract in that case would not have been made does not, in our opinion, provide an alternative and independent ground on which a collateral warranty can be established. Such a fact is but a step in some circumstances towards the only conclusion which will support a collateral warranty, namely, that the statement so relied on was promissory and not merely representational."
The critical issue is what were the parties' intentions, for:
"If the parties did not intend that there should be contractual liability in respect of the accuracy of the representation, it will not create contractual obligations." Per Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61.
In this case no evidence was given that Mr Ives said or did anything which demonstrated that he intended that his words should be regarded as a contractual promise as opposed to a mere representation or that he uttered them with the intention of inducing Mr Price to enter into the agreement. But it is clear of course that whether a warranty was intended does not depend upon evidence of Mr Ives' subjective state of mind. As Gibbs CJ went on to say in Hospital Products Ltd v United States Surgical Corporation (supra) at pp61 and 62:–
"The intention of the parties is to be ascertained objectively; it 'can only be deduced from the totality of the evidence': Heilbut, Symons & Co v Buckleton [1913] AC 30, at p51. In other words, as Lord Denning said in Oscar Chess Ltd v Williams [1957] 1 WLR 370, at p375; [1957] 1 All ER 325, at p328:
'The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.'
The intelligent bystander must however be in the situation of the parties, for 'what must be ascertained is what is to be taken as the intention which reasonable persons would have had if placed in the situation of the parties': Reardon Smith Line v Hansen–Tangen [1976] 1 WLR 989, at p996; [1976] 3 All ER 570, at p574."
But a jury is not permitted to draw an inference that a warranty was intended from the air: they may only do so by the application of logical processes to established facts and in my view the materials in this case were insufficient to ground such an inference. There is no reference in the written agreement to the representation and there was no evidence that any oral reference to the representation was made by anyone when the agreement was executed. There was little evidence at to what, if any, other negotiations took place between the parties or as to what, if anything, happened between the parties from the time when the representation was made to the time when the agreement was executed. Save to acknowledge that he had "some say" in the way in which the terms of the written agreement were arrived at, and that on one occasion he had a conversation with Mr Ives and on another occasion he had a conversation with Mr Ives and the solicitor who prepared the agreement, Mr Price gave no evidence as to the circumstances under which the agreement was prepared. Mr Price did not suggest that he had said to or given any indication to Mr Ives or to anyone else that he would only continue the negotiations or execute the agreement on the basis of the assurance he claimed Mr Ives had given to him. In my view there was insufficient evidence before the jury to enable any rational assessment to be made of the significance which an intelligent bystander would have attached to the representation in the light of the parties' relationship and dealings. In my opinion the evidence before the jury was quite insufficient to establish the facts necessary to give rise to an inference that the statement was promissory and not merely representational. I have therefore reached the conclusion that the evidence before the jury was not capable of supporting a finding that Mr Ives' statement constituted a collateral warranty.
Grounds 2(a) and 2(b)
Because of the way in which the case was conducted little attention seems to have been given at the trial to the issue of whether it was lawfully open to the jury to take into account the evidence of the representation alleged to have been made by Mr Ives to Mr Price when they were construing the contract or deciding whether the term relied upon by the respondents should be implied. But, notwithstanding that the appellants have not contended that the learned trial judge misdirected the jury or failed to give the jury a full direction as to the use the jury could make of that evidence, it is necessary for this Court to decide for itself whether the jury were entitled to take that evidence into account so as to enable it to determine whether having regard to the extrinsic materials to which the jury were entitled to have regard it would have been lawfully open to them to have imported the implied term relied upon or to have given the expression "milking cows" the meaning contended for by the respondents.
In L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Lord Wilberforce said at p261 that where parties have reduced their agreement to writing:–
"The general rule is that extrinsic evidence is not admissible for the construction of a written contract; the parties' intentions must be ascertained, on legal principles of construction, from the words they have used. It is one and the same principle which excludes evidence of statements, or actions, during negotiations, at the time of the contract, or subsequent to the contract, any of which to the lay mind might at first sight seem to be proper to receive."
However, it is also clear that it is permissible for a court to have regard to the factual background or surrounding circumstances when it is construing the words in a written agreement or when it is deciding whether an implied term should be imported into it. As Lord Wilberforce said in Prenn v Simmonds [1971] 3 All ER 237 at 239 and 240:–
"The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti–literal, tendencies, for Lord Blackburn's well–known judgment in River Wear Comrs v Adamson (1877) 2 App Cas 743 at 763, [1874–80] All ER Rep 1 at 11 provides ample warrant for a liberal approach. We must, as he said, enquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view. Moreover, at any rate since 1859 (Macdonald v Longbottom (1860) 1 E & E 977, [1843–60] All ER Rep 1050) it has been clear enough that evidence of mutually known facts may be admitted to identify the meaning of a descriptive term."
See also the reasons for judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at pp347–353 and the cases he discusses.
But it is also clear on the authorities that a court may not have regard to statements made by parties in the course of negotiations when it is construing a written agreement unless they are statements which tend to establish objective background facts which can properly be regarded as part of the surrounding circumstances. Thus in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 in which one of the issues was whether the word "leases" appearing in a written contract for the sale of land should be construed as "commercial leases", Mason J, in reasons for judgment in which all the other members of the Court agreed, said at p606:–
"The respondent also sought to rely on the oral testimony given by officers of the appellant and the respondent as to what was said and done during the course of negotiations leading up to the making of the contract, with a view to demonstrating that the parties had 'commercial' leases in mind. This was said to be evidence of surrounding circumstances to which recourse could be had in interpreting the contract. In truth the evidence is not evidence of surrounding circumstances; it is evidence of the antecedent oral negotiations and expectations of the parties and as such it cannot be used for the purpose of construing the words of a written contract intended by the parties to comprehensively record the terms of the agreement which they have made."
In Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) Mason J embarked upon a comprehensive review of the authorities and after expressing his conclusions about the admissibility of surrounding circumstances generally said this about evidence of prior negotiations at p352:–
"Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification."
See also Prenn v Simmonds (supra) at pp240 and 241.
The same general principles apply equally and perhaps a fortiori to the admissibility of evidence to show that a term ought to be implied: see Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) per Mason J at 353 and Brennan J at 403.
In my view no basis has been shown which would have justified recourse to the evidence of the conversation between Mr Ives and Mr Price as an aid to the interpretation of the words "milking cows" or as material relevant to the determination of the question of whether the term relied upon should be implied. The question then arises whether it was open to the jury to so construe the contract or to import the implied term without that evidence.
There was evidence that a cow could give milk and thus be capable of answering the description "milking cows" for many months after it had calved. Counsel for the respondent conceded that there was no evidence to support a claim that the words "milking cows" bore a special meaning by virtue of any custom or trade usage and the evidence did not suggest that the expression "milking cows" had a special meaning in the district. In my view it is clear that whether viewed in isolation or in conjunction with those extrinsic materials to which the jury were entitled to have regard, the words "milking cows" were not capable of being construed as "cows which will calve during the period of nine weeks following 14 August 1985".
I turn to consider the question of whether it was open to the jury to import the implied term relied upon. The conditions which need to be satisfied were discussed by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) at pp346 and 347 as follows:–
"The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties' actual intention; the implication of a term is designed to give effect to the parties' presumed intention.
For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract. So in Heimann v The Commonwealth (1938) 38 SR(NSW) 691, at p695 Jordan CJ, citing Bell v Lever Brothers Ltd [1932] AC 161, at p226, stressed that in order to justify the importation of an implied term it is 'not sufficient that it would be reasonable to imply the term. ... It must be clearly necessary'. To the same effect are the comments of Bowen LJ in The Moorcock (1889) 14 P.D. 64, at p68; Lord Esher MR in Hamlyn & Co v Wood & Co [1891] 2 QB 488, at pp491–492; Lord Wilberforce in Irwin [1977] AC, at p256; Scrutton LJ in Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592, at pp605–606.
The basis on which the courts act in implying a term was expressed by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, at p227 in terms that have been universally accepted: 'Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying ...'
The conditions necessary to ground the implication of a term were summarized by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR. 20, at p26: '(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract'."
In essence counsel for the respondents relied upon (1) the conversation had between Mr Ives and Mr Price; (2) a submission that the cows had to be in calf if the respondents were going to be able to meet the butter fat quotas specified in the agreement; and (3) evidence suggesting that seasonal milking was more efficient and economical than all the year round milking and that Mr Hughes had employed the seasonal milking system on the Huett's Road property.
For the reasons I have already given I reject submission (1). Although he did not formally abandon it counsel eventually was unable to point to evidence which was sufficient to sustain submission (2). The evidence referred to in support of submission (3) was capable of sustaining a conclusion that seasonal milking might have been more profitable than all the year round milking, but the evidence also showed that other farmers in the district, including Mr Hughes when he was farming the Huett's Road property, employed or had employed the latter system and it was clear that it could not be said that seasonal milking was the only system which could be used.
Although I accept that it might be arguable that the surrounding circumstances – other than the representation – including the milking pattern which had been established at Huett's Road were capable of giving rise to an implied term that the cows were in calf, upon no basis were the circumstances capable of giving rise to an implied term that they were to produce calves over a period of nine weeks commencing on 14 August 1985.
There was no obvious gap or deficiency in the agreement and the agreement was capable of operating without the implied term. I am satisfied that the evidence fell far short of being capable of sustaining a conclusion that the term was not merely reasonable but was necessary in order to give business efficacy to the contract and that it was so obvious that its implication goes without saying.
I would uphold grounds 2(a), 2(b) and 2(c) in both appeals. In view of the crucial nature of the issues raised in those grounds it is obvious that the verdicts and judgments must be set aside. I therefore do not find it necessary to consider the other grounds of the appeals. I turn to the question of what orders this Court should make.
Section 50(1) of the Supreme Court Civil Procedure Act 1932 provides that a new trial shall not be ordered on the ground that the trial judge misdirected the jury or because the judge failed to direct the jury on any question which he was not asked to direct them on unless in the opinion of the Full Court some substantial wrong or miscarriage has been thereby occasioned. Counsel for the appellants made submissions to the trial judge about the issues which are the subject of the above grounds of appeal but in the end acquiesced in their being left to the jury. Thus whether leaving those issues to the jury fell into the category of a misdirection or a non direction, the case falls within the section. However, as the misdirection or non direction in this case related to the issue of whether the evidence was sufficient to sustain a finding as to a crucial element of the respondents' case, it seems to me clear that the court should be satisfied that a substantial wrong or miscarriage of justice has been thereby occasioned.
Counsel for the appellants submitted that in the event of all three of these grounds being upheld there should not be a retrial of the whole case but only a retrial of the remaining issues.
Section 47(4) of the Supreme Court Civil Procedure Act provides that:–
"(4) Notwithstanding anything contained in subsection (1), on the hearing of any appeal in any case in which a verdict has been found by a jury, a Full Court, if it is satisfied –
(a)that it has before it all the facts, and that no further material evidence could be produced at another trial; and
(b)that the verdict was one which a jury, viewing the whole of the evidence reasonably, could not properly find,
shall enter judgment for the party for whom the verdict should have been given at the trial, and for that purpose may exercise any of its powers under section 39(5)(a), but if any damages have to be assessed any party interested in the assessment of the damages may require the same to be assessed by a jury."
Section 39(5)(b) makes similar provision in the case of applications for a new trial.
I am not satisfied that on another trial no further material evidence as to the circumstances surrounding the making of the agreement or the making of the representation relied upon could be produced and I am therefore not satisfied that the Court is obliged to enter judgment pursuant to either of those sections.
Assuming that the court retains a discretion to enter its own judgment rather than order a new trial notwithstanding that neither s39(5)(b) nor s47(4) apply, I would for the following reasons not regard it as just to do so in this case:
1The appellants did not include in their notices of appeal notice that they would be seeking judgment in this Court.
2The appellants first submitted that such orders might be appropriate in the course of making submissions in reply to this Court.
3The issues as they were ultimately left to the jury were not clarified until a very late stage in the trial. Thus for example during submissions made after the conclusion of the evidence counsel for the respondents at first submitted that the respondents' case was that the agreement was partly oral and partly in writing and then resiled from that position and relied upon the allegations based upon an implied term and a collateral warranty. As well it seems to me that it may well be the case that at the trial insufficient attention was given to the precise terms of the implied term or collateral warranty upon which the respondents relied. Thus, as appears from the excerpt I have set out above, even in his address to the jury counsel for the respondents was making submissions as if the issue were simply whether the appellants warranted that the cows were in calf rather than whether they warranted that the cows were in calf and that such calves would be born during the period of nine weeks commencing on 14 August 1985. Echoes of that failure to focus on the precise issues which were involved were apparent even on the hearing of this appeal. For the foregoing reasons I am not confident that the issues were explored sufficiently in the evidence to make it just for this Court to enter its own judgment on the matters in dispute between the parties.
I would allow the appeals, set aside the verdicts and judgments and order that there be a new trial of the actions.
File No FCA 130/1987
FCA 131/1987
IVES & ANOR v PRICE & ANOR
REASONS FOR JUDGMENT FULL COURT
COX J
23 August 1989
I have had the advantage of reading the reasons for judgment prepared by the Chief Justice and by my brother Wright. Like the latter I have some reservations in asserting that there was insufficient evidence for the jury to conclude that there was a collateral warranty, but in any event am of the view that the verdict cannot be sustained as it may have been wrongly based upon an implied term the existence of which is not supported by the evidence. In all other respects I agree with the reasons of the learned Chief Justice and with the orders he proposes in each appeal.
File No FCA 130/1987
FCA 131/1987
IVES & ANOR v PRICE & ANOR
REASONS FOR JUDGMENT FULL COURT
GREEN CJ
23 August 1989
I need not refer to the facts which are presented in detail in the reasons for judgment of the Chief Justice. For the reasons which he gives I agree that upon the evidence, the words "milking cows" used in the contract were not capable of being construed as "cows which will calve during the period of nine weeks following 14 August 1985."
I also agree that in the circumstances there was no basis for implying a term in the contract that the cows would calve during that nine week period. I am less confident that there was insufficient evidence for the jury to conclude that there was a collateral warranty, but as their verdicts for the respondent may have been based upon either the alleged implied term or the alleged collateral warranty, both issues having been left to them, it is unnecessary for me to resolve this doubt. If their verdicts were based upon an implied term they cannot stand and as there is no way of telling whether they rest upon that ground rather than a collateral warranty, the only proper way to resolve the difficulty is to order new trials.
I therefore agree that the appeals should be allowed, the verdicts and judgments should be set aside and there should be a new trial of both actions.
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